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Four Questions to Ask Yourself


How Much Do I Need at Retirement?
How Much Do I Need to Contribute Now?
How Do I Choose My Investments?
Who Can Help Me With My Retirement Planning?


How Much Do I Need at Retirement?

Before you can determine how much you need to save today to reach your future financial goals, you may first want to get an idea of how much income you'll need to meet your expenses during retirement. Here are a few quick tips to help you learn what your retirement income needs may be:

  • Estimate the percentage of your working income you'll need to replace, think about the age at which you expect to retire, and consider how long you'll need your retirement income to last.

  • Save as much as you can today and take advantage of catch-up paycheck contributions, as available, to boost your savings in the years leading up to retirement. Also, take advantage of the voluntary Deferred Compensation Program.

  • Consider consolidating assets from other eligible accounts into your current Deferred Compensation Program to potentially simplify your savings strategy and stay on track toward your retirement goals.

Tools and Resources

To help you understand how much you'll need to save to meet your retirement income goals—and the impact that saving will have on your financial situation—you can use the following calculator:

  • Retirement Planner – Develop a realistic plan for your future retirement expenses and the income you'll need to achieve the retirement lifestyle you want.

  • Saving for retirement is one part of your overall financial picture, and it helps to understand how the actions you take today affect your current and future finances. You can use this calculator at any time to clarify your goals and develop a personalized strategy for achieving the retirement you want.


How Much Do I Need to Contribute Now?

While your contributions to Plan 3 are fixed, you can decide how much to contribute to the Washington State Deferred Compensation Program. This decision will have a significant impact on how much you accumulate in your accounts over time. The most important thing is to start saving right away, because even waiting one year can make a big difference in the amount you could potentially have in your account when you retire.

As the table below illustrates, different contribution amounts at different ages, can have a dramatic effect on how much you could potentially have in your account by the time you retire.

Starting Age
Total Contributions Age 65
Account Value Age 65
Cost of Waiting One Year















FOR ILLUSTRATIVE PURPOSES ONLY. This hypothetical illustration shows how the number of years invested in the Plan could affect participant account values. It is not intended to depict the performance of any particular security or investment. It assumes monthly contributions of $100, an annual 6% rate of return, retirement at age 65, and no withdrawals. Savings totals do not reflect any fees/expenses associated with your Plan. The accumulations shown above would be reduced if these fees had been deducted. Income taxes are due upon withdrawal. Rate of return may vary.

When you ask yourself how much you should save, the quick and easy answer is, "as much as you can." The following quick tips show you that it may be more affordable than you think.

  • Before-tax paycheck contributions mean that your take-home pay may not be affected as much as you think.

  • Before-tax savings have the potential to lower your current taxable income, and that means you may pay less income tax each year you make before-tax paycheck contributions.

  • Save as much as you can as soon as you can because the earlier you begin, the longer you'll have to benefit from potential tax-deferred growth and earnings.

Tools and Resources


How Do I Choose My Investments?

In deciding how to invest your deferrals, consider all of your assets.

Then ask yourself:

  • How much money will you need for your retirement?

  • How many years do you have before retirement?

  • How much risk are you willing to tolerate?

No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerances for risk. It is important to periodically review your investment portfolio, investment objectives, and the investment options available to help ensure that your retirement savings will meet your retirement goals.

Two Different Approaches To Investing

To determine which approach – Build and Monitor or One-Step Investing – might be right for you, ask yourself these questions:

  • Do I have the desire to select my own mix of individual funds?

  • Am I comfortable deciding how much to invest in each fund?

  • Do I have the time to keep an eye on my investments and make changes as I get closer to retirement?

If the answer to any of these questions is yes, you may be interested in the Build and Monitor approach to investing. If the answer to any of these questions is no, you may be interested in the One-Step Investing approach.

  • Build and Monitor

    The Build and Monitor approach allows you to create your investment portfolio by selecting from any or all of the professionally managed funds offered.

    The amount of potential risk and return associated with each fund, as well as your tolerance for risk, is one way to think about which investment(s) you might be interested in. With this in mind, remember diversification is also important.

    Choosing from the investment funds above means you are responsible for monitoring your portfolio and rebalancing the allocation mix as necessary to maintain your investment objectives.
  • One-Step Investing

    If you find you don't have the desire, comfort level and/or time to select your own mix of funds, monitor them and make changes, allocating your investments to a Retirement Strategy Fund may be right for you.

    Retirement Strategy Funds are diversified asset allocation portfolios designed for people who want to leave ongoing investment decisions to an experienced portfolio management team. All you have to do is pick the Retirement Strategy Fund with the date closest to your expected target date for retirement. The management team adjusts the asset mix of your Retirement Strategy Fund over time to the allocation it deems appropriate for your age.

    To select the Retirement Strategy Fund that's right for you, take the year you were born and add it to the age you expect to retire or withdraw your funds. The sum is your target date.
  • How does One-Step Investing work?

    1968 (birth year) + 65 (retirement age) = 2033 (target date)

    Pick the fund with the date closest to your target date.

    If your target date changes, you can transfer your money to a Retirement Strategy Fund that more closely matches your revised date.


To help achieve long-term retirement security, your portfolio should include investments in several different objective categories. DRS offers several different fund options to choose from.

Spreading your assets among different types of investments may help you achieve a favorable rate of return, while minimizing your overall risk of losing money. Market or other economic conditions that can cause one category of assets, or one particular security, to perform very well can often cause another asset category, or another particular security, to perform poorly. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk.

With the One-Step Investing approach, your Retirement Strategy portfolio is already well diversified and will automatically adjust as you move closer to your target date. With the Build and Monitor approach to investing, you can allocate your contributions among the available funds to achieve diversification and support your investment goals.

For information on investing and diversification, visit the U.S. Department of Labor website.

Fund Types


Stable value funds invest in conservative securities such as guaranteed investment contracts (GICS), cash, U.S. Treasury bills and/ or fixed-rate Certificates of Deposit. Their aim is to provide stability and safety of principal and a predictable, stable yield over the long term. Because of the nature of their investments, stable value funds are not generally subject to market fluctuations.

Income (or bond) funds invest in securities that pay interest. Such funds hold a variety of government, municipal and corporate debt obligations, money market instruments, and other fixed income instruments. The price of shares in a bond fund, and the yield and return, will fluctuate depending on the bond, current interest rates and the value of your shares at the time they were bought and sold.

Social funds are investment funds that employ both investment objectives and social concern criteria. The criteria may include environmental standards, product safety and usefulness, worker satisfaction and involvement, and/or animal testing. Also, certain companies, such as nuclear utilities or weapons manufacturers, may be excluded from a social fund. Social criteria can be combined with almost any investment objective including income, balanced, growth and income, or growth.

Large cap funds invest in the largest companies in a particular universe, in this case, the U.S. equity market. Large cap is an abbreviation of the term “large market capitalization”. Market capitalization is calculated by multiplying the number of a company’s shares outstanding by its stock price per share. In general, this fund will invest in the largest 500-1000 stocks in the U.S. stock market by market capitalization. One of the major advantages of large cap funds is they historically have been somewhat less volatile than mid cap and small cap funds. On the flip side, large cap funds have historically offered somewhat lower returns than mid cap or small cap funds over long time periods.

Global funds invest in the stocks of companies throughout the world, including both developed markets and emerging markets. This option will invest in all capitalization ranges, including large and small cap stocks. This diversity allows opportunities that can be greater than any one country’s strong or weak economic environment at any point in time. However, there can also be additional risks with global funds, including currency fluctuations and political and economic instability in some countries. Many people confuse a global fund with an international fund. The difference is that a global fund includes the entire world; whereas an international fund does not include companies in the investor’s home country (i.e. an international fund would not include U.S. companies).

Small cap value funds invest in the smaller and less expensive companies in a particular universe, in this case, the U.S. stock market. Size is measured by market capitalization, as defined above. Currently, “large cap” is considered the largest 500-1000 stocks in the U.S. by market capitalization, and “small cap” is considered the next 1500-2000 stocks by market capitalization.

A “value” approach means that the fund invests in the smaller company stocks that look cheaper based on fundamental measures such as price-to-book and price-to-earnings ratios. A value strategy believes that such stocks, while they may have temporarily fallen out of favor with mainstream investors due to changing investor preferences or hard times in a particular industry, are trading at substantial discount to their underlying value and therefore have prospects for appreciation. Historically, value funds have provided somewhat higher returns with less volatility than broad market or growth funds.

Emerging market funds invest the majority of assets in the broad financial markets of developing countries. A developing country is characterized as being vulnerable to political and economic instability, having low average per-capita income, and of being in the process of building its industrial and commercial base. Investments in developing countries may offer superior opportunities for growth and diversification, but have also historically been more volatile and could be subject to a higher degree of currency fluctuation and/or political or economic instability.

Target date/Asset allocation funds are for investors that may not have the time or desire to constantly monitor and adjust their portfolio. These funds are a broadly diversified portfolio of securities in different asset classes that automatically adjust to different risk profiles as participants move toward and through retirement. Target date funds invest in a variety of securities in different asset classes including stocks, bonds, and real estate investment trusts. They start with a higher risk-return position and gradually become less risky as the investor ages. They attempt to provide investors with a “one-stop”, no-hassle investment option.

Index funds are a portfolio of securities structured in such a way to closely match the risk and return of a designated market index. This is different from an actively managed fund which seeks to outperform its benchmark by selectively deciding which securities to buy or sell.

Index funds are passively managed in the sense that fund managers are not trying to determine which securities they believe will perform best. Instead, index funds follow the indexes of equities, bonds or other investment vehicles either by purchasing every security in the index or by simply purchasing a representative sampling of securities in the index. The returns of an index fund are expected to be nearly the same as the returns of the index it’s following, less the fund’s operating cost. Index funds regularly rebalance to more closely resemble the benchmark portfolio.


Who Can Help Me With My Retirement Planning?

Plan 3 and DCP customer service teams are ready to answer your questions.

Contact us today!